RATING RATIONALE
23 Aug 2019
Iswarya Enterprises
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.12.00 Crs. of Iswarya Enterprises
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Open Cash Credit / Cash Credit (Hypothecation/Pledge)
Adhoc Facilities FB (CC/TL/OD) Sub-Limit (Open Cash Credit (Against book debts)) |
08.49
03.51 (04.25) |
Long Term | BWR B + (Stable) |
| Sub Total | 12.00 | ||
| Grand Total | 12.00 | (Rupees Twelve Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR believes the Iswarya Enterprises business risk profile will be maintained over the medium term. the 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive'in case the revenues and profit show sustained improvement. The rating outlook may be revisd to 'Negative' if the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERS
BWR has essentially relied upon the audited financial statements of Iswarya Enterprises up to FY18 and, provisional and projected financial statements up to FY19 and FY21 respectively, publicly available information and information/clarifications provided by the entity’s management.
The rating draws strength from the vast business experience of the partners, established track record of operations and an increase in demand of the products traded. However, the rating is constrained by the scale of operations, constitution of the firm and high competition from other established players in the market.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.
Strengths
- Experience of the promoter :
The managing partner of the firm Mr. Paduchuri Ramanath is having business experience in this related field of more than 2 decades and his wife Mrs. Paduchuri Aiswarya is having 10 years of experience. The extensive experience of the promoters and their understanding of the dynamics of the industry will continue to support the business risk profile. The firm is a family-owned business.
- Operational track record and established relationships with customers :
The firm has an operational track record of more than a decade and has seen complete business cycles. The company has a relationship of more than a decade with its top five customers and has geographical reach across India and because of the quality provided, timely supply and ethical business values, they have created a loyal customer base and has been able to bag repeat orders which have facilitated growth in its scale of operations.
- Increase in the demand outlook for groundnuts and pulses :
India is a heavy importer of cooking oil because of inadequate oilseeds production leads to a huge shortfall in domestic production of the cooking medium. In the recent budget, the FM has urged the farmers to make an increase in the plantation of oilseeds just they had done for pulses in recent years. The measures have been taken to decrease the import and help the economy. These measures would give a certain rise in the demand for oilseeds and pulses and certainly would help the business to grow.
Weakness
- Moderate scale of operations and thin profit margins :
The firm has been in operations for more than a decade however, it has low a scale of operations with a total operating income of 32.97 crores in FY18 with relatively thin profit margins with NPM of 0.31% as compared to other peers in the industry. However, the firm has achieved on a provisional basis a total turnover of 60.25 Crores. due to an increase in the groundnuts, and pulses.
- Low networth of the firm and high gearing :
The firm has a very low networth to the tune of Rs. 1.40 Crs. and the firm has outside debt liabilities of 8.48 Crs. The firm is highly leveraged with a debt-equity ratio of 6.05 times.
- Presence in a highly competitive and fragmented industry :
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.
- Limitations of the constitution of the firm :
Withdrawal of capital by the Partners for any personal contingency would adversely affect the capital structure of the firm.
For ariving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
LIQUIDITY POSITION
Liquidity: Stretched
The firm has a stretched liquidity position and weak debt protection metrics with ISCR of 1.13 and DSCR of 1.10. The current ratio of the firm is 1.17 times. The firm has net cash accruals of 0.15 crores and the cash and cash equivalents position stood at 16 Lakhs in FY18.
PROFILEIswarya Enterprises (IE) is a partnership firm formed on 27th of May 2004 having a registered office in Ananthapur Dist., Andhra Pradesh. The entity is engaged in the business of decorticating and processing of groundnuts, pulses (red grams, green grams, etc.), packaging and trading the same. IE deals in trading of commodities like G N Pods, G N Seeds, Red grams, Neem Seeds, Neem Powder, Neem Fruit, Horse Grams across India. Mr. Paduchuri Ramanath, who has inherited this family business, is the managing partner of the firm having 20 years of experience to his credit in the related field and is well versed with the dynamics of this business. His wife Mrs. Paduchuri Aiswarya is the partner of the firm having 10 years of business experience.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 17-18 |
FY 16-17 |
|---|---|---|---|
| Operating Revenue | Rs.Crs | 32.97 | 17.26 |
| EBITDA | Rs.Crs | 1.20 | 0.24 |
| PAT | Rs.Crs | 0.10 | 0.05 |
| Tangible Net Worth | Rs.Crs | 1.40 | 0.77 |
| Total Debt/Tangible Net Worth | Times | 6.04 | 7.83 |
| Current Ratio | Times | 1.17 | 1.13 |
NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| CRISIL | 05 Aug 2019 | 9.00 | CRISIL B/(Stable) Issuer Not Cooperating |
| CARE | 29 Mar 2019 | 10.00 | CARE B+;Stable, Issuer Not Cooperating |
| S.No | Current Rating (2019) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2018 | 2017 | 2016 | ||||
| Fund Based | ||||||||||
| 1 | Open Cash Credit / Cash Credit (Hypothecation/Pledge)Adhoc Facilities FB (CC/TL/OD)Sub-Limit (Open Cash Credit (Against book debts)) | Long Term | 8.493.51(4.25) | BWR B+(Pronounced as BWR Single B plus)(Outlook: Stable) | NA | NA | NA | |||
| Total | 12.00 | (Rupees Twelve Crores Only) | ||||||||
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf Investors queries can be sent to info@brickworkratings.com.
Hyperlink/Reference to applicable Criteria : For More Information Contact:| Analytical Contacts | Investor Contacts |
|---|---|
|
Umang Pardasani Ratings Analyst B : +91 80 4040 9940 Ext : 370 umang.p@brickworkratings.com |
Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com |
|
Nagaraj KS Associate Director - Ratings B : +91 80 4040 9940 nagaraj.ks@brickworkratings.com |
|
| 1-860-425-2742 | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Open Cash Credit / Cash Credit (Hypothecation/Pledge) | 8.49 | _ | 8.49 |
| Sub-Limit (Open Cash Credit (Against book debts)) | (4.25) | |||
| 2 | Adhoc Facilities FB (CC/TL/OD) | 3.51 | _ | 3.51 |
| Total | 12.00 | |||
| TOTAL (Rupees Twelve Crores Only) | ||||
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